I have been saying for some time that we are near the bottom in Orange County. Last May I bought a home near the beach at a price that I thought was pretty good. More than once I heard something like "You are nuts, what if prices go lower and interest rates drop?"
My answer then was simply "So What?". I didn't think that prices would drop much further. I could easily stomach a 10% decrease in my home value if that really did happen, and a 4.25% fixed loan was pretty cheap. In the world of retail finance, 4.25% is as close to free as I think you are going to get.
The big banks hold the cards right now, so my crystal ball is filled with a giant logos for the big three banks. Rumor has it that BofA and Wells Fargo are sitting on over 1 Million homes each that are over 120 days late and waiting for foreclosure, in addition to the 1 Million homes they already have foreclosed on or are in the process of foreclosing.
Now those numbers are pretty much conjecture as far as I can tell. Time Magazines Business blog last August said "There are nearly 1.7 Million homes in the U.S. in some state of foreclosure." Which is probably a more realistic number. In the big scheme of things, that number isn't that bad. Another tracking agency I use to find foreclosures for my wife and her investor clients says that in Southern California, the number is 1 out of every 687 homes. Last year it was 1 out of 542 according to the same site.
That means there are fewer foreclosures. Keep in mind there will always be some.
I said it before and I will say it again now. If you can buy, and you live in Southern California, by all means buy everything you feel comfortable that you can afford. If you are thinking about moving up, call my wife, get your home listed and start looking. Inventory is thin. The good deals go in less than two weeks. Great deals in a couple of days.
The difference between a good deal and a great deal isn't $50,000 anymore, it is condition. Any home in really good condition at a fair price doesn't last. If your home is on the market and sitting for more than 30 days without an offer, there are one of two problems. Your agent isn't doing their job, or it is priced too high. The good news is someday the market will catch up to your price again.
For those of you that walked away from your home, I am sorry you did it. A quick economic lesson here. When the U.S. Government prints money, there is a short term boost to the economy of 2-3 years and then inflation follows. In simple terms if there is $100 in the world, and there are two houses, then each house can only be worth $50.00. If the government magically creates $300 and convinces two people to build to more homes at $50 each, there are now four homes and $300 in circulation. When the people figure out what is going on, then instead of building two more home, the existing owners raise the prices. Each house is now worth 1/4 of $300 or $75.
In the last three years, to slow the economy's downward spiral, it is estimated by several sources that the U.S. Government tripled the money supply. The economy hasn't grown much and now inflation is rearing it's head. This is going to be one big inflationary baby. Home prices will follow.
If you are on the verge of losing your home, and it is worth at least 80% of the current market value, Call Your Bank. Work out a deal. They don't want anymore foreclosures, and you don't want the headache of moving. At the very least get an agent and consider a short sale.
Already I have seen several investor newsletters saying the courthouse auctions are getting more competitive and it is time to start getting creative. Investors are now approaching the owners and the banks directly to try and work a deal. These same newsletters are also saying in Southern California "low balling" isn't working because there are other buyers for just about every house.
I am not saying we are back to the craziness of 2006-2008, but I am saying, the banks are tired, the people are tired and the government has pumped up the money supply. This is as close to bottom as I can ever see it getting. That means one thing. Buy if you can, hold if you can't, and if you don't own, now is the time. We all know that rising inflation means rising rents, no matter what the price of houses does.
There is one other variable, but I'll save that for later in the week.
No comments:
Post a Comment